Bryan Jackson: We will pay the price for spiral of debt in the 'good old days'

This debt is equivalent to 150 per cent of income in 2010 and is the equivalent of 60,793 per household, said the OBR, set up by the coalition government.

The truth is that the debt mountain accumulated during the boom period up to 2008 remains with us and seems insurmountable. Lending has been severely cut back in recent years with the growth in personal debt only increasing by 0.8 per cent to the end of July.

Secured lending increased by a measly 0.1bn in July whilst consumer credit lending increased by 0.2bn, which is a far cry from the peak period in January 2008 when it increased by 8.4bn. For most people these figures may seem unreal and scarcely believable. But they translate for those most in debt into a time of worry, confusion, and often ill health as the excesses of a few years ago have turned into the austerity of today. Debts which, inexplicably, seemed manageable three years ago now seem impossible.

The issue is that while we have already had the recession in the private sector there are growing and clear signs that we are about to go through another one in the public sector. The proposed cuts in public-sector finance already announced - and those to be announced in Chancellor George Osborne's Comprehensive Spending Review next month - will dramatically put into reverse the current local and national government expenditure.

The result will be considerable job losses both within the public sector and among those groups which serve it in both the private and charitable sectors.

This wave of unemployment will cause a slowdown in the wider economy but will also push more people into personal insolvency. Those who have large debts which they are currently able to service at the minimum level will find they quickly spiral into insolvency when their income is gone and they are reliant on state benefits.

What this tells us is that we may well have got through the current economic downturn, but its outcomes and implications will continue for many years to come.

I believe that we are looking at a four or five-year period before the economy really stabilises itself and we start to see a return to strong and sustainable growth.

In the meantime, unfortunately, many people who regret signing up for more debt three or four years ago and will now find that what had seemed affordable is now beyond their reach. Sadly, they will become yet another statistic in the rising levels of personal insolvencies in Scotland.

• Bryan Jackson is a corporate recovery partner with accountants and business advisers PKF.